subject: Foreclosures Should You Buy Them Or Not? [print this page] As a real estate investor, you are already aware of what happens when a given homeowner could not pay up the mortgage; the lender is left with nothing but the option of taking possession of such property. This is known as foreclosure. After taking full possession of the property, the lender is left to decide what to do with the house but in almost every case, such home is put up for sale in the form of an auction in order to recover as much as they can in terms of the loan granted for the purchase of the said property. Now buying foreclosures is sure to give you more profit but it does come with its risks, challenges and advantages.
Talking about what you should know as a real estate investor who wishes to invest in foreclosures, it would interest you to know what you should look out for or expect when it comes to such investment. We shall first of all, talk about the advantages of putting your money in such property.
Advantages: In buying such homes, you find them to be much cheaper and this stems from the fact that since the lender or financial institution that issued the loan for the purchase of the house might not have any need of same property and the only option becomes to sell it off and recover all or most of the value of the loan. They are sold off as auctioned properties and since the lender already knows that there are risks associated with buying foreclosures, they compensate the buyers or investors by selling them at prices that are very much lower than the propertys real value in the market.
Risks involved: One risk that has been on the forefront for a real estate investor as far as purchasing foreclosures is concerned is that of the deteriorating condition of the building in question. Some persons, knowing they would be thrown out on default of the mortgage payments might resort to gradually destroying such property and in most cases they dont even carry out any form of maintenance. Since a larger percentage of foreclosures are not inspected prior to purchase, it means you stand the risk of paying for a building you cannot ascertain its condition, especially the interiors. There is also the risk of the original owners of such property engaging the buyer in legal tussles, especially if they were still occupying the house when it was bought. This means you could be faced with the option of processing an eviction for such occupants.
Challenges: In buying foreclosures, some of the challenges you might experience includes but not limited to not being selective as to the type of property you want including its location. Also, in most cases, you would be required to carry out rehabilitation work on the property.
Knowing all these, you should then be able to decide if as a real estate investor, you want to buy foreclosures or not.
